retirement account contributions and tax brackets

[Sterling Hiebert]

hello all,

first time poster. I am curious about tax deferred retirement accounts and income tax brackets. I am right on the edge of the 12%/22% tax bracket making just a couple thousand too much to be in the 12%. I currently contribute to a 403B (kindof like a 401K but for NPOs and contributions are fixed), through my employer and use a Roth IRA for additional retirement investing. my question is if I opened a traditional IRA so that my contributions were coming out pre-tax along with the 403B, would that push me back down into the 12% tax bracket because that money is no longer considered income or am I stuck paying 22% no matter what?

would there be any reason why a person wouldn't want to do this? google seems to be not-forthcoming with an answer. I get the advantages/disadvantages of deferred vs exempt retirement strategies, I am just curious if it is possible to use contributions to save an additional 10% of my income every year. 

[Derrick Dill]

Tax brackets

10%	Up to $9,875
12%	$9,876 to $40,125
22%	$40,126 to $85,525

If you're making 40,127$, you're taxed 12% on 40,126$. 1$ will be taxed at 22%. 

You won't be "bumped up" to a higher tax bracket, common misconception.

[Randy Bloch]

1) tax brackets are incremental so you are only paying  22% on amounts over the 12% limit

2) 22% tax bracket is still pretty low

3) Answer to your question is most likely "yes" If u contribute to traditional IRA and are able to deduct that, I believe limit is 5k, then will lower your taxable income by 5k.

4) Personally, I would continue to invest as much after tax as possible (Roth or brokerage account ) when u are are low tax bracket like 22%, especially if you want to invest in Real estate, it will be easier to access.

[Derrick Dill]

Tax brackets

10%	Up to $9,875
12%	$9,876 to $40,125
22%	$40,126 to $85,525

If you're making 40,127$, you're taxed 12% on 40,126$. 1$ will be taxed at 22%. 

You won't be "bumped up" to a higher tax bracket, common misconception.

[Sterling Hiebert]

interesting. that's actually good to know. if that is the case, then it would be better to just stick with the Roth. 

[Daniel McNulty]

@Sterling Hiebert

Yes! Stick with Roth while you are young and in the lower tax brackets.

[Sterling Hiebert]

this forum is great. even though I am really in no position to invest in real estate (other than buying REIT shares but that's cheating a little), this forum has been extremely helpful in educating myself on things that really are only glossed over in the personal finance field in other parts of the web.